(Bloomberg) -- Mexico will grow 3% this year and next, with inflation slowing to 4% and the government posting a primary surplus as President Andres Manuel Lopez Obrador wraps up his term, according to a first draft of the 2024 budget presented by the Finance Ministry on Friday.

Inflation in Latin America’s second-largest economy is expected to slow to 5% by the close of this year and reach 4% by the end of 2024, from the most recent level of 7.12% in early March. That’s slightly above the estimates of Mexico’s central bank, which expects average inflation of 4.8% in the fourth quarter and 3.1% in the last quarter of 2024.

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The government’s plan for 2024, the last of Lopez Obrador’s six-year term, suggests a primary surplus — that means, without counting interest payments — equivalent to 0.7% of gross domestic product and a total public deficit of 2.7%. For 2023, the primary deficit will equal 0.1% of GDP, slightly better than an initial 0.2% deficit estimate, and a total budget deficit of 3.7%.

“An orderly transition for the next administration is guaranteed,” the Finance Ministry led by Rogelio Ramirez de la O said in a statement accompanying the document. “Mexico’s new political economy is a reality.”

While the Mexican economy has surprised on the upside last year, growing a better-than-expected 3.1%, private economists expect a slowdown in 2023 as the US — Mexico’s No. 1 trading partner and the biggest buyer of its products — faces the risk of a recession. GDP will expand 1.4% in 2023, 1.9% in 2024 and 2.2% in 2025, according to a survey conducted by Bloomberg News earlier this month.

Meanwhile, other factors such as nearshoring, which refers to the movement of companies to Mexico to be closer to the North American market, are expected to continue providing a boost to the economy. 

Exports, Oil

In its budget draft, the Finance Ministry also predicted that the Mexican crude basket would be at $66.6 per barrel in 2023 and $56.3 in 2024, following a period of volatility in energy prices that the government had sought to keep in check by subsidizing consumers’ costs at the pump. 

Mexico’s forecast oil output is 1.877 million barrels per day this year and 1.914 million barrels per day next year. 

Crude exports are estimated at 800,000 barrels per day for 2023, and 786,000 barrels per day next year. The government has repeatedly postponed plans to end crude exports as part of its bid to make the country self-sufficient in fuel generation.

By law, Mexico’s Finance Ministry needs to send to congress a preliminary budget for the following year no later than April 1, with the final proposal being presented to lawmakers no later than Sept. 8.

--With assistance from Alex Vasquez.

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